The District of Columbia government paid an additional $6 million last year to have sewage sludge hauled from its Blue Plains treatment facility because the local company awarded the contract was unable to do the work.

Mayor Marion Barry signed a $20 million, five-year contract last year with Dano Resource Recovery Inc. of Alexandria, although the firm had never before done such work and had no plant, trucks or barges for hauling and treating sludge.

The company was unable to obtain permits to build a plant and has not hauled even a pail of sludge since receiving the contract.

As a result, the city has been forced to use costly alternatives to get the sludge removed from Blue Plains. Dano Resource Recovery Inc. Of Alexandria had promised in the contract to remove the sludge for $11 a ton. The district government is now paying as much as $45 a ton to have Bevard Bros. of Silver Hill, Md., haul away the black, mud-like substance from the sewage treatment facility.

Since Mayor Barry signed the contract with the Dano firm the city has paid $10.9 million to Bevard Bros. and others to have 900 tons of sludge a day removed. The contract wih the Dano firm called for payment of only $4.7 million during that time, according to figures supplied by John R. Thomas, the chief of the Blue Plains facility.

There were these other unusual features of the sludge contract:

The city rejected the lower bid on a portion of the sludge contract by Rainwater Concrete Co. of Lorton, Va., even though that firm is well-established and offered a price 11 percent lower than that of Dano Resource Recovery Inc. The city said Rainwater did not have a proper bid bond, guaranteeing that the city would be compensated if Rainwater did not do the work.

The city accepted the bid bond offered by Dano Resource Recovery Inc., even thogh it was signed by an official of a company that installs reinforced steel rather than an authorized bonding company. The steel company, M. J. Byorick Inc., is owned by one of Dano Resoure Recovery Inc.'s owners, and the two companies share the same address in Alexandria.

After Dano Resource Recovery Inc., received the award, the city waived a requirement that it submit a performance bond to guarantee it would do the work after bid bond expired. As a result, the city appears to have no practical way of collecting on the losses it has incurred.

In addition to the sludge contract, the city awarded Dano Resource Recovery Inc. a$10.5 million contract to haul away some of the city's trash. No other bids were requested from other companies. Dano Resource Recovery Inc. has also failed to move any trash.

A spokesman for Mayor Barry did not dispute the additional $6 million cost to the city but said Barry's only role was in approving contracts negotiated before he became mayor.

"He only signed the contracts as the chief executive," the spokesman for Barry said. "He was not involved in the negotiation or review of the contracts. There were no contacts by the mayor [with Dano Resource Recovery Inc. or its owners] beyond his being present at the signing."

Sam D. Starobin, former director of the city's Department of General Services, who also signed the contract with Dano Resources Recovery Inc., said in an interview recently that he had not known that the firm was not insured by an authorized bonding company.

"A bid bond has to the be with a bonding company," said Starobin, who has since left city government and is now with an engineering firm in Boston.

"I know the company was lobbying Mayor Barry," Starobin said. "[George W. Sloan, Dano Resource Recovery Inc.'s only black owner], lobbied [then city Administrator Julian] Dugas, Barry, and others to get this thing through," he said. "He, in effect, said Barry was interested."

Starobin, who was then trying to hold onto his job in a new city administration, said, "I came to the conclusion [before Barry was elected] that we were on shaky ground to reject it [The contract]. We knew it was a new company with no other customers. We needed a solution [to sludge disposal].

"Dano came up with something," Starobin said. "In the end, we may have been wrong. The point is, we didn't have an infinite number of possibilities."

Sloan, a Dano Resource Recovery Inc. vice president, said he lobbied Barry, members of the City Council and the city administration, both before Barry was elected mayor and after. Sloan runs a helicopter shuttle company and consults for Third World countries in addition to his role at Dano Resource Recovery Inc.

"We were lucky enough to have Marion Barry the chairman of the [city council's] finance committee," Sloan said. "He knew the Dano process [for turning sludge into commercial fertilizer and other products] as chairman of the committee."

Before considering the bids, the city approved plans submitted by nine companies for removing the sludge. Dano said it would mix the sludge with trash and sell the product commercially. The company said it is licensed by a Swiss company to do this using the Dano process. The city also accepted plans submitted by Rainwater Concrete and Bevard Brothers as being acceptable methods for removing and disposing of the sludge.

The city then requested these and other companies to submit bids for contracts to remove different types of sludge. Under the bid solicitation, the sludge. Under the bid solicitation, the lowest bidder on each type of sludge would be awarded the contract to remove that type of sludge.

Rainwater was the lowest bidder to haul one type of sludge. Ray Rainwater, president of the firm, said recently he did not challenge the decision to award the contract to Dano, even though Dano's bid was higher than his.

"I don't need the aggravation," Rainwater said.

Carroll B. Harvey, who now heads the General Services Department, said he believes the Dano Resource Recovery Inc. contract makes good "public policy sinse" because it would provide a way of disposing of sludge and trash together.

"No one wants sludge," he said.

He said the District's interests are protected because it obtained a promise from Dano Resource Recovery Inc. that, instead of a performance bond insuring its contract, it would sign over a bond insuring construction of its planned, $10 million processing plant. Harvey said the company also promised to take other steps to safeguard the city.

"The protection for the government is there," he said. He called the decision to award the contracts to Dano Resource Recovery Inc. "prudent."

In response to a legal action filed against the company by Virginia Attorney General J. Marshall Coleman over its attempt to build a plant in King George County, Va., Dano Resource Recovery Inc admitted it is "highly problematic" whether the District has an adequate way for collecting on its losses from Dano.

In its 1977 proposal to the city Dano Resource Recovery Inc. said it would build a processing plant in Prince George's County similar to ones used by plants using the Swiss form's process all over the the world. The company certified that it had the proper zoning for the plant, but the county later refused to grant the permits it needed.

The company then bought land in King George County But Coleman sued, saying the company either had not requested, or had been denied, the needed permits. Dano Resource Recovery Inc. is now barned by court order from building in King George, a rural area more than an hour's drive south of Washington until it has the permits.